As British farming continues to navigate a period of considerable change, we are advising rural businesses of what they need to consider when looking to diversify after seeing an increasing number of rural businesses looking to future-proof their farms by diversification.
James Thompson, a surveyor based at our Doncaster office is the regional agent for the Agricultural Mortgage Corporation* (AMC) who lent £52m to farmers and landowners in the North of England in 2021 and are experienced in lending to well-considered farm diversification projects.
James said: “Farmers can use diversification to actively reduce their vulnerability to risk should unfavourable market conditions hit their traditional enterprise. There are currently several factors affecting British agriculture, and both agricultural and non-agricultural diversification can help farmers navigate this challenging period.”
Here James gave us his top five tips for farmers looking to diversify.
“I think it is really important to get good market knowledge. For traditional farmers considering a move into non-farming activities, such as restaurants and shops, it’s important to reflect on how much they really know about the new market they’re entering. It is crucial that they read up on the competition and consider how to differentiate, they also need to consider any new means of distribution and how the new product or service will be sold.
My second tip would be to sufficiently prepare your current farming business and premises and weigh up whether the new enterprise will enhance or support the existing business and how this could be maximised. Farmers need to consider any potential negative impacts on current trading and how to manage this.
I think it is important to put people first by carefully assessing what impact the new business will have on existing staff and whether some of them have the capacity and skills to work in the new enterprise. It is likely that the farmer’s own attention will be diverted away from the traditional business, meaning they may not be able to dedicate as much time to the core business as they have done in the past. If new staff are required, they need to consider how will these be found and managed and if there’s a particular skill set needed to make the enterprise a success.
My fourth tip would be to make sure farmers set their sights on sustainability as it is an essential consideration for all farming businesses, with the goal to reduce carbon emissions and fund a greener future. So, when exploring a new enterprise, it’s important to assess its environmental impact and, if beneficial, how it will be maximised and promoted.
Finally, I think it is imperative that farmers seek professional guidance and map out a solid business plan. Seeking out funding guidance to help a diversification venture is key to success and can help mitigate risk. It’s important to work with an expert to prepare a thorough business plan outlining how the new venture will work including set up costs, cash flow projections and budgets, financial accounts of the existing business and any essential requirements such as planning permission or licences”.
*AMC loans available for business purposes only, provided on a secured loan basis. Minimum AMC standard loan £25,001. To meet customer requirements, lending criteria will vary. Lending is subject to status.
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